FON is a company that seeks to exploit network effects to supply free wireless across the globe. The working premise is that people often have wireless internet access at home, usually from a wireline internet service provider (e.g. cable or DSL). However, when away from home, people often have to pay to go online (e.g. T-Mobile hotspots). Other access points are visible, but they are often secured or locked from access (typically personal routers with WEP encryption).

FON tries to work around this problem by encouraging people to join the Fonero network. To join, you get a “La Fonera” router that you install at home. This wireless router will broadcast two access points: one for your personal use and one for public consumption. Once you have registered your Fonera, you are now allowed free access to any Fonera router in the world.

This is a clear example of a network effect where the value of your FON membership is directly related to the number of FON users worldwide. The more people that join FON, the more likely you will run across a Fonera router during your travels. FON also employs several of the techniques mentioned in class to push the membership over the tipping point. For example, if you are a FON member, you can have free Fonera routers sent to any of your friends. FON also promotes “specials” for people to join the network for free, such as free FON routers for anyone living within wifi distance of a Starbucks.

One could also argue that the FON router has some intrinsic value of its own. For one thing, the FON router is a perfectly functional wireless access point, regardless of the global FON network. The price for the router ($0) is certainly less expensive than similar offerings from Linksys, D-Link, etc.

Another interesting feature is that the FON router also has an inverse network effect! People who do not have a FON router at home (and thus not FON members) have to pay to use a public FON access point. The fewer members there are in the FON network, the more likely that people logging into your FON router will pay money for internet access. Under certain arrangements, you (the owner of the FON router) get a portion of any revenues generated from your router.

While the demand curve is unknown, there is likely a nonzero value at 0 users (due to the two arguments mentioned above: inherent value, inverse network effect). Similarly, the supply is set at $0 or close to $0 (depending on whether you qualify for any “specials”). This suggests that the FON network should tend toward the larger equilibrium point very rapidly. However, it remains to see if FON can continue to supply routers at such a low cost, since it may be unsustainable for their business to produce more free routers.

On a local note, there are several FON access points in Collegetown and around campus.